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Storm Clouds on the Horizon: Vacant Buildings and Your E&O

May 18, 2020
Commercial property claims generate a significant percentage of E&O claims against agents. Analysts expect a wave of retail and hospitality business failures, and with those failures, increased vacancies in commercial buildings can be expected to result.

Now is the time to strengthen your E&O risk management practices and procedures.
Here are some valuable tips from IIABA and Swiss RE (#4 is especially important!):

E&O Tip #1

Develop procedures in your agency operations manual to identify those clients with commercial property schedules. Then verify who owns the property, confirm where the property is located, the nature of the property and the types of losses to which the property is exposed. Although this should be part of the routine renewal process, consider mid-term verifications as well.

E&O Tip #2

In your agency procedure manual, identify the specific steps to follow when a client makes changes to their schedule, with emphasis on how to handle new acquisitions. The goal is to obtain written verification from the client which is clearly and concisely documented.

E&O Tip #3

Communicate with each client the specific policy language of their vacancy clause(s). Emphasis should be on when the clause becomes effective and the restrictions in coverage that ensue. Again, consider repeating mid-term as well as at renewal.

E&O Tip #4

Documentation of each communication with the client is critical! Make sure you can prove that you informed your client of the the insurance issues arising from vacancies and the client’s duties to the insurance carriers as well as the possible consequences of non-compliance. Incomplete or missing documentation severely weakens your defense against an E&O claim.

Download a sample letter you can use to communicate with your clients about the challenges of vacant an unoccupied properties. 

The IIAT Advantage E&O Team is prepared to help you with any E&O issues. Learn more.

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